Fed Research on Student Loan Payments and Household Wealth; Powell Speech at Economic Club of New York Is in Focus By James Christie
Good day. Research from the Federal Reserve Bank of New York finds that millions of student borrowers are likely to curtail their consumer spending by only about $56 a month on average as they restart payments on student loans, translating into a relatively small overall effect on consumption. Meanwhile, the Fed's Survey of Consumer Finances released Wednesday found the wealth of U.S. families surged in the years after Covid-19 struck, adding to signs of consumer strength that could help the economy shake off the effects of higher interest rates. Today, Fed Chair Jerome Powell will speak at the Economic Club of New York, offering him a venue to discuss how he is thinking about the next steps for the central bank when it comes to rates. Elsewhere, Indonesia's central bank this morning unexpectedly lifted its benchmark rate as it looks to support the stability of the rupiah and guard against inflation. And The Wall Street Journal's Greg Ip writes that a financial crisis in China can't be ruled out as its extensive fiscal and financial imbalances have taken the country and the world into uncharted territory.
Now on to today's news and analysis.
Top News Student Loan Payments to Have Minimal Economic Impact, Fed Finds
The resumption of federal student loan payments shouldn't be a big deal for the U.S. economy, according to research from the Federal Reserve Bank of New York.
Across 28 million federal student loan borrowers, the researchers estimate about $1.6 billion less in consumer expenditures a month.
"The findings suggest that the payment resumption will have a relatively small overall effect on consumption, on the order of a 0.1-percentage-point reduction in aggregate spending from August levels, " the New York Fed's Raji Chakrabarti, Daniel Mangrum, Sasha Thomas and Wilbert van der Klaauw said in a post on the bank's Liberty Street Economics blog.
Beige Book Sees 'Slightly Weaker' Economy, Easing Inflation
The U.S. economy exhibited "stable" to "slightly weaker" growth in the early fall, the Federal Reserve's latest Beige Book survey report said, helping to loosen up a tight labor market and ease inflation. Most parts of the U.S. "indicated little to no change in economic activity since the September report," according to the Beige Book report. It added that higher wages, oil prices and insurance costs kept upward pressure on inflation, but businesses "struggled" to pass on cost increases to resistant consumers who have grown more sensitive to prices. The result has been falling profit margins at many firms. (MarketWatch)
U.S. Economy Household Net Worth Surged After the Pandemic Hit
Households' inflation-adjusted median net worth, or wealth, climbed 37% from 2019 to 2022, according to a Federal Reserve survey. It was the largest increase since the once-every-three years survey began in 1989.
The 60-40 Investing Strategy Just Had Its Worst Year in Generations
Millions of Americans for years have adopted a time-honored Wall Street strategy to safeguard and grow their retirement nest egg: a mix of 60% U.S. stocks and 40% bonds known as the 60-40 portfolio. Now, it is failing them .
Home-Sales Report to Show How Much High Rates Squeezed Market
Economists surveyed by The Wall Street Journal estimate sales of previously owned homes fell a seasonally adjusted 3.5% in September from August, which would mark the fourth consecutive monthly decline.
Some Companies Give Remote Workers an Ultimatum
Company leaders are getting desperate to fill offices that emptied during the Covid-19 pandemic, and they say their companies are more innovative and collaborative when employees are in the office.
American Employees Reinvent the Sick Day
The number of sick days Americans take annually has soared since the pandemic, payroll data show, due in part, managers and human-resources executives say, to a shift in the way many workers relate to their jobs .
Key Developments Around the World China's Economy Faces Deepening Troubles in Years Ahead
While China's economy is shifting into a lower gear, it showed some signs of life on Wednesday, with strengthening retail sales helping to drive growth to a faster-than-expected 4.9% in the third quarter.
China's New Home Prices Fell 0.3% in September Indonesia's Central Bank Surprises With Rate Hike
Indonesia's central bank unexpectedly raised its benchmark seven-day reverse repo rate by 25 basis points to 6.0% , after months of standing pat, marking the second time this year that it has tightened policy settings.
Bank of Korea Stands Pat Again as Economy Shows Signs of Cooling
The Bank of Korea left its benchmark seven-day repurchase rate unchanged at 3.50% for a sixth consecutive time, as expected, unfazed by a recent pickup in inflation, which had been cooling for months.
Bank of Japan Raises Economic Assessment for Six of Nine Regions
The Bank of Japan raised its economic assessment for six of the nation's nine regions, including the Tokyo area, and maintained its view for the other regions, according to its quarterly regional economic report.
U.S. Lifts Broad Sanctions Against Venezuela for Six Months
The U.S. announced the removal of a broad array of sanctions against Venezuela's oil and gas sector in response to a deal between the country's government and political opponents that could lead to presidential elections in 2024.
Oil Prices Edge Down After Sanctions Lifted on Venezuela Financial Regulation Roundup Top Crypto Brands Step Up Pitches to Consumers and Lawmakers
Two of crypto's biggest brands are working to reintroduce consumers and lawmakers alike to the optimism that powered early investment in the sector, even as the high-stakes trial of FTX founder Sam Bankman-Fried remains in focus.
Morgan Stanley's Earnings Fall as Investment-Banking Revenue Drops
Morgan Stanley said third-quarter profit fell 9% from a year ago, hit by investment-banking revenue dropping 27% . Within that, fees from advising corporate clients on mergers and acquisitions fell by more than 30%.
Forward Guidance Thursday (all times ET)
8:30 a.m.: U.S. weekly jobless claims; Philadelphia Fed manufacturing index for October
9 a.m.: Fed's Jefferson speaks at 18th Central Bank Conference on the Microstructure of Financial Markets
10 a.m.: U.S. existing home sales for September; The Conference Board Leading Economic Index for September
12 p.m.: Fed's Powell speaks at Economic Club of New York Luncheon
1:20 p.m.: Chicago Fed's Goolsbee speaks at Wisconsin Manufacturers & Commerce Business Day
1:30 p.m.: Fed's Barr speaks at 2023 Federal Reserve Stress Testing Research Conference in Boston
4 p.m.: Atlanta Fed's Bostic speaks at The New School's Schwartz Center for Policy Research
4:30 p.m.: Federal Reserve balance sheet
6 p.m.: Dallas Fed's Logan speaks at Money Marketeers of NYU dinner event
Friday
12:15 p.m.: Cleveland Fed's Mester speaks at SOMC Fall Meeting, Manhattan Institute for Policy Research
Research Clear ECB Message on Rates, October Meeting 'Interim'
The European Central Bank's message from its Sept. 14 meeting has been clear and doesn't need a material update at this stage, Reinhard Cluse, an economist at UBS, writes in a note ahead of the ECB's rate-setting meeting on Oct. 26. The message from the last meeting is that ECB policy rates have likely peaked, but the central bank stands ready to keep rates restrictively high for as long as necessary to bring inflation back to the 2% target in a "timely" manner, he writes, not expecting meaningful decisions or new guidance to emerge. "Next week's meeting is likely to be an 'interim meeting' and a bridge towards the more important session on 14 December, when the ECB will present a fresh set of macro projections," he writes.
-Emese Bartha
Commentary Don't Rule Out a Financial Crisis in China
The world's second largest economy has a deflating property bubble, local governments struggling to pay their debts and a banking system heavily exposed to both. Anywhere else these factors would be seen as precursors of a financial crisis. But not in China, conventional wisdom goes, because its debts are owed to domestic rather than foreign investors, the government already stands behind much of the financial system and capable technocrats are on top of things. Conventional wisdom might be dangerously out of date , Greg Ip writes.
Wall Street's Green Shoots Risk Wilting
The risk for deal-making activity for investment banks isn't just that the soil is a bit dry. It is that the ground is ripped up and parched, turning what is sometimes seen as a temporary lull into one lasting for years , Telis Demos writes.
Basis Points U.S. mortgage applications fell 6.9% in the latest week, the Mortgage Bankers Association said. (MarketWatch) Daily U.S. 30-year mortgage rates hit a milestone 8% on Wednesday afternoon, putting more pressure on home buyers. A survey by Mortgage News Daily showed the 30-year fixed mortgage rate increased 0.08 percentage point to 8.00% as yields rose on 10-year Treasury debt. The yield on the 10-year, which helps determine mortgage rates, topped 4.9% on Wednesday. (Barron's) Construction of new U.S. homes rebounded 7% in September to an annual pace of 1.36 million units after a 1.5% drop in August, the Commerce Department said Wednesday. Economists on Wall Street were expecting a 6.8% rise in starts to 1.37 million units. All numbers are seasonally adjusted. (MarketWatch) Canadian housing starts rose strongly last month, boosted by continued strength in multi-unit activity. Housing starts across Canada came in at a seasonally adjusted annualized rate of 270,466 units for September, an 8% rise from the month before, Canada Mortgage and Housing Corp. said Wednesday. (Dow Jones Newswires) U.S. commercial crude-oil stockpiles fell by 4.5 million barrels last week to 419.7 million barrels, and are now about 5% below the five-year average, the Energy Information
(MORE TO FOLLOW) Dow Jones Newswires
10-19-23 0715ET
